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PR: Vans, Inc. Reports Second Quarter and Six Months Sales and Earnings
12/18/98
SANTA FE SPRINGS, Calif.--Dec. 18, 1998--Vans,
Inc. (Nasdaq: VANS) today announced financial results for the second
fiscal quarter and six months ended November 28, 1998.
Net sales for the quarter increased 3.1% to $45.6 million,
compared to $44.2 million for the second quarter of fiscal 1998. Net
income was $2.5 million, versus net income of $2.9 million in the same
period last year, and diluted earnings per share was $0.19 versus
diluted earnings per share of $0.21 in the second quarter of fiscal
1998. Net sales for the six months increased 13.1% to $111.1 million,
compared to $98.2 million for the corresponding six months of fiscal
1998. Net income rose to $7.3 million, versus net income of $6.8
million in the same period last year, and diluted earnings per share
increased to $0.53 versus diluted earnings per share of $0.49 in the
first six months of fiscal 1998.
Gary H. Schoenfeld, Vans' President and Chief Executive Officer
stated, "We are pleased with our performance in the second quarter led
by a 28% increase at Vans retail stores and significant gross margin
expansion. Specific highlights included the continuing transition in
Europe from third party distributors to centralized sales, marketing
and distribution; the TV launch of the VANS Triple Crown Series which
attracted more than 10 million viewers during the quarter; the opening
of the world's largest skate park, which some have called the most
innovative retail concept in a regional mall; and recognition as
Marketer of the Year by Footwear News."
Total U.S. sales, including sales through Vans' U.S. retail
stores, increased 15.2% in the second quarter to $34.0 million, versus
$29.5 million for the same period a year ago. Overall sales through
the Company's 106-store retail chain increased 28.3% to $13.1 million
in the second quarter, from $10.2 million for the same period a year
ago. Comparable store sales for the second quarter were up 9.4% versus
the same period last year. Domestic wholesale sales in the second
quarter increased 10.2% to $21.2 million, versus $19.3 million a year
ago. Total international sales decreased 21.3% to $11.6 million,
versus $14.7 million for the same period last year. Gross margins for
the quarter increased 420 basis points to 43.6% versus 39.4% a year
ago, primarily due to a channel mix more heavily skewed toward the
higher-margin retail and national wholesale businesses versus sales
through international distributors.
"We went into this fiscal year excited about our brand
positioning with a record increase in backlog for back-to-school and a
belief, like most in the industry, that the challenges from the prior
year for several brands and retailers would be behind them. Looking
back over the past six months, our brand positioning is even stronger
and our product sold well during back-to-school," Mr. Schoenfeld said.
"Yet our current backlog for the third quarter is up only modestly
versus last year, with our efforts in Europe offset by the continued
softness of the shoe business in the U.S. and the declining economic
condition in Mexico and South America. Therefore, despite many of the
positive things we are doing, we believe earnings for the second half
of the year are likely to be relatively flat versus the $0.18 per
share we earned in the second half of last year (before restructuring
charges), with most of the shortfall from both our internal
expectations, as well as Wall Street's consensus, coming in the third
quarter." (1)
Mr. Schoenfeld continued, "Given what we are currently seeing in
the marketplace, we intend to reduce costs where possible, while at
the same time pushing forward on those aspects of the business we can
most directly impact such as our retail stores, growth in Europe and
our unique marketing concepts and venues. Bookings for Europe are up
more than 40% for the second half and our skate park has significantly
exceeded our internal expectations from both a publicity and financial
standpoint. We generated more than $250,000 in revenue with more than
8,000 participants in the first three weeks and are now in
negotiations to open two to three additional parks in the next fiscal
year. We are also developing three new VANS Triple Crown concept
stores, leveraging off the success of our retail sales including hard
goods at our skate park along with the extensive media coverage on
ESPN of the VANS Triple Crown Series, and our plan is to open at least
an additional 10 to 15 of these new stores in fiscal 2000. Finally,
with our internet web site receiving nearly 100,000 'unique visitors'
per month, we have begun working to integrate e-commerce into our
site, www.Vans.com." (2)
Mr. Schoenfeld concluded, "As alternative sports broaden in
appeal and influence, we will continue to pursue innovative sales and
marketing efforts which focus on making VANS the premier lifestyle
brand for the youth market and help us further transform from a
one-dimensional footwear business to a multi-dimensional global,
youth, lifestyle company."
Vans, Inc. designs, markets and distributes active-casual
footwear, clothing and accessories, performance footwear for
enthusiast sports, snowboard boots, Switch(tm) step-in bindings, and
outerwear worldwide to a target customer base of 10 to 24 year-old men
and women. Products are sold through a network of independent and
national retailers, internationally through distributors and sales
agents for 80 countries, and Company subsidiaries in the United
Kingdom, Mexico, Brazil, Uruguay and Argentina, and through 106
Company-owned stores and factory outlets (as of December 18, 1998).
Vans web site is located at www.Vans.com.
Vans, Inc.
Condensed Consolidated Financial Summary
Second Quarter and Six Months Fiscal Year 1999
(Dollars in thousands, except per share amounts)
Statements of Operations
Three Months Ended Six Months Ended
Nov 28, Nov 29, Nov 28, Nov 29,
1998 1997 1998 1997
Net sales $ 45,559 $44,203 $111,062 $ 98,158
Cost of goods 25,680 26,793 63,079 58,980
Gross profit 19,879 17,410 47,983 39,178
Gross profit
percentage 43.6% 39.4% 43.2% 39.9%
Expenses:
Selling and
distribution 10,400 8,285 21,195 17,284
Marketing, advertising
and promotion 3,717 3,426 10,912 8,761
General and
administrative 1,783 1,780 4,660 3,489
Other expense
(income), net (a) (820) (1,066) (1,564) (1,843)
Goodwill amortizati 345 229 610 458
Interest expense
(income), net 75 (41) 152 (86)
15,500 12,613 35,965 28,063
Expenses and other
items as a percentage
of sales 34.0% 28.5% 32.4% 28.6%
Earnings before
income taxes 4,379 4,797 12,018 11,115
Income tax expense 1,577 1,622 4,327 3,844
Minority interest 271 292 421 437
Net earnings $2,531 $ 2,883 $7,270 $6,834
Earnings per share information:
Basic:
Weighted average
shares 13,313 13,281 13,308 13,230
Net earnings
per share $ 0.19 $ 0.22 $ 0.55 $ 0.52
Diluted:
Weighted average
shares 13,623 13,948 13,634 13,881
Net earning
per share $ 0.19 $ 0.21 $ 0.53 $ 0.49
Footnote:
(a) Other income consists primarily of
licensing royalties and
sublease income.
Vans, Inc.
Condensed Consolidated Financial Summary
Second Quarter and Six Months Fiscal Year 1999
(In thousands of dollars)
Balance Sheets Nov 28, Nov 30,
1998 1997
ASSETS:
Current assets
Cash $ 9,398 $ 7,916
Trade receivables 29,962 31,394
Inventory 38,987 32,776
Deferred income taxes 5,469 0
Other 5,852 3,000
Total current assets 89,668 75,086
Property, plant and
equipment - net 19,455 19,303
Intangible assets 23,511 18,277
Other 2,977 4,445
Total assets $ 135,611 $ 117,111
LIABILITIES:
Short-term borrowings $ 15,936 $ 6,001
Current liabilities 15,040 10,214
Restructure costs 2,331 0
Other long-term liabilities 6,622 3,663
Total liabilities 39,929 19,878
Minority interest (a) 750 695
Shareholders equity 94,932 96,538
Total liabilities and
stockholders equity $ 135,611 $ 117,111
Sales by Distribution Channel
Three Months Ended Six Months Ended
Nov 28, Nov 29, Nov 28, Nov 29,
1998 1997 1998 1997
U.S.:
Wholesale $ 21,247 $ 19,288 $ 55,294 $ 43,038
Retail 12,713 10,182 29,151 22,931
Total U.S. 33,960 29,470 84,445 65,969
Total Int. 11,599 14,733 26,617 32,189
Total Sales $ 45,559 $ 44,203 $ 111,062 $ 98,158
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